Debt settlement is just one of numerous ways to
climb out of debt. Debt consolidation and credit counseling are both preferable
to debt settlement, but debt settlement may help you avoid bankruptcy or
foreclosure if your situation is very serious.

You have the option of settling your debt
yourself, but you’re more likely to be successful if you hire a professional
debt settlement service to handle your paperwork and negotiations. A debt
settlement company will review your debts and determine which are most likely
to be settled. Credit card debt settlement is the most common form. Medical
debts are often negotiable. Student loans are not negotiable and mortgages are
almost never negotiable. Unfortunately, sometimes it’s not possible to repay
your debts in full. If you've suffered an extended job loss, an expensive
medical emergency or illness, or a death in the family, you may not be able to
recover from the debt created by the situation. Rather than file for
bankruptcy, which will ruin your credit for 7 to 10 years, you could try debt
settlement first. When you apply for debt settlement, the service will review
your accounts and then contact your creditors to negotiate a settlement.
Settlements are typically for 30-50% of the balance, but can be as high as
75-80%. In rare cases, your settlement can be as low as 20%. A reputable debt
settlement service won’t guarantee a specific rate and won’t offer “credit
repair” services in addition to the settlement. The settlement process can take
anywhere from a few months to a few years, depending on the level of your debt.
Some services ask you to make debt payments to their escrow service or ask you
to set aside the money yourself. Some services require lump sums to pay off
negotiated debts while others let you pay over time.

Debt settlement will affect your credit rating.
Your creditors will report your accounts as “account settled” or “account
settled for less than the full balance.” Although these statements aren't positive, they’re better than a bankruptcy or multiple current delinquencies.
If you’re considering credit card debt settlement, it’s likely that you’re
already behind on payments, facing collection, or considering bankruptcy, so
debt settlement may actually help you start to restore your credit.

Like debt management plans, debt settlement can
also help you learn to change your spending habits and approach to credit card
debt. Most settlement services require that you stop using credit cards or
taking out loans while you’re in the program. Once you learn to stop relying on
credit, you’ll be less likely to fall into debt again.

In addition to the ding on your credit rating,
debt settlement has another negative side effect: higher taxes. The IRS
requires that all settlements over $600 be reported as income, which means you
could be taxed on the amount of the debt you didn't pay. When combined with
settlement fees, you may find that the settlement won’t save you much money
over paying the debt in full.

You should also know that creditors are not
required to settle your debts. You may have to pay some or all of your debts in
full if the settlement service isn’t able to negotiate with your creditors.
Creditors will generally make their decision based on your income, payment
history, financial situation, and the number and amount of the debts being
settled. They’re unlikely to negotiate a greatly reduced settlement if
you’re able to pay most of your other debts or own a home with equity.
They’re more likely to negotiate if you’re in collection, about to file for
bankruptcy, or have several debts in delinquency because they’d rather receive
something than face debt cancellation in bankruptcy court.

Credit card debt settlement
should be reserved for dire situations. If you’re on the verge of bankruptcy,
then debt settlement is appropriate for you. If you have the means to repay
your debts, seek debt consolidation or credit counseling instead.

About this site

This blog was created with a single purpose of making folks become aware about corrupt
billion dollar student loans business. We built this not only to educate the public
about college conspiracy and everlasting financial burden that Student Loans sets
on us, nonetheless to provide assistance in a form of Student Loan debt settlement.
We are a small team of experts, dedicated to providing superior service and step-by-step
guidance to consumers who seeking to escape from everlasting Student Loans debt.